How to Create a Loyalty Program That Works

Thinking back to a more simple time in retail, loyalty was won and lost with customer service. You bought your groceries, clothes or household goods from shopkeepers you knew. Often, loyalty was won over generations; sons got their haircut by their father’s barber. Three generations of family might make clothes for three generations of customers. Fortnum and Mason, a London department store, have counted the British Royal family among their customers since 1707.

Today, loyalty seems synonymous with points programs run by large retail players. Shoppers Optimum gives you free merchandise for collecting points. PC Points gives you free groceries. Petro-Points gives free gas or car washes. Air Miles and Aeroplan also attract large retailers with the promise of bringing along their existing customer bases. With 4.6 million Aeroplan members and over 10 million Air Miles members, they are well positioned to deliver on this promise.

However, the small and mid-sized merchant largely remains outside the loyalty universe. Programs such as Rogers Vicinity, aimed at the small to mid-sized businesses, have largely stalled with high merchant adoption, but low customer use. Paper stamp cards or their mobile app based equivalents on platforms like Flok or Kangaroo are still struggling to prove they bring in net new business, versus incentivizing existing customers.

If you don’t have the resources to start your own loyalty program or the money to pay the high cost of entry to Air Miles or Aeroplan, how do you get loyalty right?

Keep It Simple

Don’t make customers do the math on a complex loyalty program. Starbucks knew this when it designed its original points program. Collect enough points and you get something free. Really, you get anything free, from a coffee to a sandwich to a Triple Mocha Soy Latte. Letting a customer choose their reward while keeping the system simple was part of the program strategy.

Make it Immediate

It’s always thrilling to get a little something extra in shipment when shopping online. Stickers, postcards, samples, a handwritten note. These things create a lasting brand impression and make us more likely to shop again. Have lots of little freebies or accessories you can add to a customer purchase rather than making them save up points for larger items.

Make It A Game

Enter every customer into a contest. Let them spin a wheel for discounts. Give out scratch cards. If you have a physical retail location, this attracts children and families and can create a unique in-store engagement and encourage word of mouth promotion.

Close the Loop

Patagonia creates exceptional loyalty and returning traffic with its Common Threads Initiative (Reuse & Recycle). This program allows customers to resell Patagonia products they brought into the store through an eBay site; Patagonia provides assessment and repairs. This got people in store with their old products and they left with new ones!

Be Good

Programs like One Percent for the Planet that direct a portion of sales to charitable programs work well. People may not always see value in collecting points, but they derive great satisfaction in knowing they are participating in making the world a better place. This can be a powerful motivator to bring in new customers and keep existing ones.

With consumers moving to boutique merchants, local sourced foods and restaurants, the maker movement and small online retailers, perhaps the monolithic loyalty program has reached its limits?

Always be prepared to try something new to attract and retain customers but never forget that true customer loyalty is best built the old fashioned way; one customer at a time through exceptional customer service and quality products.

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